A tenant is entitled to the benefit of the rule or practice in equity which relieves against forfeitures of valuable lease terms when default in notice has not prejudiced the landlord, and has resulted from an honest mistake, or similar excusable fault. This rule has been expanded to preserve the tenant's interest in a long-standing location for a retail business because this is an important part of the good will of that enterprise, and thus the tenant stands to lose a substantial and valuable asset.
Appellant tenant leased a building from respondent landlord. The lease agreement contained an option to renew the lease, which stated that appellant was to notify respondent by certified mail six months prior to the last day of the term of the lease if appellant desired renewal. Subsequently, respondent sent a letter to appellant informing it that the option had expired and that appellant was to vacate the premises. Appellant then sent notice of intention to renew the option, which was refused by respondent. Respondent commenced suit to recover the premises, and appellant replied that it was entitled to equity to relieve it from a forfeiture. The trial court found for appellant, and the lower appellate court reversed.
Can a tenant, who negligently failed to follow the terms of a lease, have a right to equitable relief where the landlord was not prejudiced?
The court held that an equitable interest was recognized and protected against forfeiture if the landlord was not harmed by the delay in the giving of the notice and the tenant would have sustained substantial loss. A tenant was entitled to the benefit of equity where default in notice did not prejudice the landlord. Thus, the case was remanded for a determination of whether respondent was prejudiced by appellant's failure to give notice.